A client’s offshore outsourcing program becomes strategic by investing in social capital

Abstract

As evident in the previous chapters, decision-makers often rationalize offshore outsourcing by comparing hourly rates for domestic and offshore workers. This approach is dangerous because it assumes domestic and offshore workers are equivalent “factors of production”. Once engaged in offshore outsourcing, senior executives are often disappointed. Many complain that offshore suppliers do not understand their business, deliver late, and produce poor-quality work. In reality, the problems are not caused primarily by the supplier — they are primarily caused by the client’s naive focus only on costs and failure to invest properly in the relationship.